Tony Chukwunyem 
The attraction of high money market and fixed income market rates to foreign investors, occasioned by the country’s high interest rate environment and the hawkish stance of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC), will result in sustained improvement in total capital imported into Nigeria, United Capital has predicted. The company stated this while reacting to “Nigeria Capital Importation Q1’24,” report released last week by the National Bureau of Statistics (NBS).
It noted that Foreign Portfolio Investment (FPI) contributed significantly to the sharp rise in total capital imported into the country in the first three months of the year. Specifically, the firm said: “The National Bureau of Statistics (NBS)’s Capital Importation Report for Q1-2024 shows that the total capital imported into the country in Q1-2024 printed at $3.4 billion. This represents a 210.2 per cent q/q upsurge when compared to $1.09 billion in Q4-2023. It also signifies a 198.1 per cent y/y increase when compared to $1.13 bn in Q1-2023.
“Noteworthily, the capital imported in Q1-2024 is the highest reading in 15 consecutive quarters (since Q1-2020, which settled at $5.9 bn) contributed the bulk of the total capital imported into Nigeria in Q1-2024, accounting for 61.5 per cent (33bps higher than its 28.5% contribution in Q4-2023).” It further stated: “Taking a further dive into the numbers, Foreign Portfolio Investment (FPI) contributed the bulk of the total capital imported into Nigeria in Q1-2024, accounting for 61.5 per cent (33bps higher than its 28.5 per cent contribution in Q4-2023).
Total FPI inflows printed at $2.1 bn in Q1-2024, 570.1 per cent q/q and 219.7 per cent y/y higher than its prints of $309.8 million and $649.3 million in Q4-2023 and Q1-2023 respectively. “The inflows from foreign portfolio investors helped improve dollar supply and marginally ease Foreign Exchange (FX) pressures. Notably, foreign investments majorly flowed into money market instruments, which grew by 592.3 per cent q/q to settle at $1.6 billion in Q1 -2024.
On a yearly basis, it expanded by 1,175.2 per cent y/y compared to the $125.9 million recorded in Q1-2023. This is on the back of the higher money market rates experienced in the quarter under review. “In Q1-2024, the Central Bank of Nigeria (CBN) began its inflation-targeting framework and strong fight against FX pressures. Accordingly, the CBN conducted OMO auction to mop up excess liquidity and offered very attractive rates to appeal foreign investors into the nation.” “Looking forward, we expect sustained improvement in total capital imported into Nigeria, majorly accruing from foreign portfolio investors.
This is on the back of the high interest rate environment within the nation and the hawkish stance of the Monetary Policy Committee (MPC). The MPC remains committed to combat rising inflationary pressures by tightening the economy and reducing money supply,” the company added.
